The Transactional RFP Business is Dying

Image“80 percent of the publishers getting an RFP don’t even stand a chance.” – Doug Weaver, Upstream Group

Direct mail is an amazing thing. It costs something like $750 CPM to put a glossy catalogue in the mail, but somehow direct marketers make those numbers work. Mailing lists are constantly optimized to make sure they hit the right houses, fresh lists acquired to create new demand, and non-performing lists ruthlessly culled if they don’t meet certain KPIs. Direct marketers actually can tell just how much money a mailing will produce in sales.

Contrast that with a banner campaign, in which “good” performance means a 0.05% click-through rate, 40% non-viewable inventory, and fairly dim transparency. Some of the greatest companies in the space, newly public and boasting hundreds of millions in run rates, are still challenged to justify spending to their marketing clients. Thankfully, last click attribution hasn’t gone anywhere. I recently overheard a marketer at a conference saying that 70% of clicks on her last campaign with a big, popular “platform” came from Yahoo Mail subdomains. It doesn’t take a genius to figure out that the marketer’s e-mail program was creating sales, but the fancy platform’s banners were making sure they were “last viewed” before the purchase.

So, how to get display advertising more like direct mail?

It must start with procurement. Marketers should be able to tell how much the media costs, who will view it, and who to buy it from. Unfortunately, unlike almost every other form of media on the planet, that doesn’t exist today for the digital marketer. Marketers can name their price in the programmatic RTB channel, but if they want access to directly sold inventory (making up as much of 70% of all digital media spend today), they need to purchase via the “transactional RFP” process.

I don’t know whose fault it was, but publishers didn’t help themselves when they decided to hide pricing information from agencies. With an endless supply of inventory (some 5 trillion impressions per month, according to Eric Picard), banner sales has always been a bit more art than science. Buy 1,000,000 homepage impressions at $20 CPM, and I’ll throw in 5,000,000 “ROS” impressions. Presto! You get a reasonable eCPM of just over three bucks. Everybody’s happy….except for publishers. In the long run, such practices devalue their inventory.

Media prices are still opaque in the transactional RFP channel, and agencies like it that way. In order to get basic pricing and availability information, they send out “requests for proposals,” which send publisher sales teams scrambling. According to recent research by Digiday and Adslot, publishers spend an average of 1,600 man hours a month on RFPs, and 18% of their revenue churning through RFPs that have an average “stick rate” of about 25% (campaigns that will deliver the contracted amount).  Ouch! A lot can happen in 1,600 hours.

Peter Naylor, the IAB’s Publisher in Residence, speaking to publishers at a recent conference summed it up nicely when he said, “Agencies take the information they receive in RFP’s to get a view of the market.”  In other words, agencies get access to all the pricing information, and publishers are left to wonder who they are competing with—and at what price.

Despite this, agencies would also like to see this procurement methodology perish also. They want to buy impressions at scale, control the price they pay, and be able to “out-clause” on demand. Programmatic RTB offers all of the above—but only on lower classes of inventory. New programmatic direct technologies seem to be the answer to the problem of transactional RFPs. Whether they leverage existing RTB pipes (private deals) or are API-driven solutions connected to the publisher’s ad server, more and more higher-class inventory is starting to find its way to programmatic channels. That’s a good thing. Sure, there will still be RFPs for sponsorships, but sooner or later, all commoditized banner inventory (including “mobile” and video) will likely be purchased programmatically.

The question for publishers is whether or not they are going to take a part in deciding what the next stage of digital media procurement looks like. Will it still be driven by the demand side, or can publishers have a bigger seat at the table, and help build the process by which they expose and sell their “premium” inventory?

The RFP is dying, and publishers may applaud the last breaths of an over complex and inefficient process. But they should be careful of what may take its place.

[Originally publisher in AdExchanger on 1.2.14]

Programmatic Direct is in the Top of the Second Inning

ScoreboardLately, I have been working on a whitepaper about the “programmatic direct” phenomenon. Part of the research involved surveying a bunch of influential people in the space, and asking them where they thought this new buying methodology was in terms of adoption. Their answers kind of surprised me.

If “programmatic direct” was a baseball game, we are in the top of the second inning.

The game has basically just started, and a few balls have been put into play, but the action is just getting started—and the big sluggers have yet to step up to the plate. If you are a regular AdExchanger reader, you would be justified in thinking that programmatic direct was quickly gaining steam by progressive agencies and publishers. After all, there has been a good deal of hype surrounding the idea of enabling programmatic access to higher classes of inventory, and it seems like almost every ad technology player in the display space is getting into the game.

Sure, some real innovations are happening in programmatic RTB that are enabling private marketplace transactions. Initiation-only auctions and fixed rate deals inside of exchanges are only the tip of the iceberg, though. New web-based technology and advanced ad server APIs are starting to provide real process automation—the tools that will make it easier to buy and sell the 70% of inventory currently procured through the “transactional RFP” process.

However, there are a few major things that need to happen before “programmatic direct” can really take hold:

A Directory: It may sound strange, but one of the biggest failings of digital media has been the lack of a directory for buyers. In direct mail, you can look up how many people get the L.L. Bean mailing list, add all kinds of criteria (males of a certain age that have purchased with a credit card in the past three months), find out exactly what it costs, and who to buy it from. No such thing exists in digital media. Hence, the RFP process, where buyers have to go through hoops just to get a sense of pricing and availability. This simple act of discovery adds time and complexity to every transaction. Today’s programmatic direct systems are being built from the ground up—starting with good information, and also with dynamic pricing and availability information thanks to API connections to DFP and other publisher ad servers.

Standards for Electronic Ordering: Another obvious thing that needs to happen before real process automation can happen in digital is that a set of standards have to be agreed upon. The IAB has known this since 2008, but five years later the “eBusiness Task Force” (now called the “Digital Automation Task Force”) seems no closer to its original mandate. Its stated mission: Updating the XML schema and implementation testing for the electronic delivery of digital advertising business document.” Those documents include Requests for Proposals (RFPs), insertion orders (IOs), and invoices—documents that must be standardized in order for adoption of programmatic direct buying to occur at scale. However, there is urgency like never before to get such standards implemented, and a source close to the action says that “we will see more movement in the next nine months in standards and protocols than has happened in ten years.” Let’s hope so. The wide adoption of a common set of standards and protocols opens up the door to the electronic IO—the key to achieving scale in programmatic direct.

Culture Change: While a directory can be created and standards adopted with lots of hard work, those things are actually easier than the real key to programmatic direct adoption: culture change among agencies and publishers.  Agencies must leverage technology to empower the “23 year old media planner” and give them a reason beyond sneaker parties to go to work. Technology will unleash their creativity and get them focused on solving real problems for clients. Likewise, publishers need to escape the “$200,000 a year salesman,” with his accompanying high T&E and schmoozy selling style. Publishers need data-driven sellers that understand how to drive programmatic adoption, and can sell based on the new “media investment” paradigm happening at agencies—understanding tactically how to spread digital dollars across a broad portfolio of channels. Agencies now they cannot remain stuck with the current cheap labor model. Publishers understand that they cannot keep their higher classes of inventory outside of programmatic channels. Change is hard, but it’s already here.

About a year ago, I said that 2013 would be the year of programmatic direct. It turns out that 2013 has been the year of programmatic direct hype, and a ton of valuable behind-the-scenes work on the technologies that will drive it in the future. But unlike the perennial “year of mobile” programmatic direct will become a reality quickly if some of the above building blocks come together.

[This post originally appeared in AdExchanger].

Are Publisher Trading Desks Next?

tradingDeskA long time ago, I was selling highly premium banner ad inventory to major advertisers. Part of a larger media organization, our site had great consumer electronics content tailored to successful professional and amateur product enthusiasts. The thing we loved most was sponsorships and advertorials. We practically had a micro-agency inside our shop, and we produced amazing custom websites, contests, and branded content sections for our best clients. They loved our creative approach, subject matter expertise, and association with our amazing brand. They still capture this revenue today.

The next thing we loved was our homepage and index page banner inventory. We sold all of our premium inventory—mostly 728×90 and 300×250 banners—by hand, and realized very nice CPMs. Back then, we were getting CPMs upwards of $50, since we had an audience of high-spending B2B readers. I imagine that today, the same site is running lots of premium video and rich media, and getting CPMs in the high teens for their above-the fold inventory and pre-roll in their video player. I was on the site recently, and saw most of the same major advertisers running strong throughout the popular parts of the site. Today, a lot of this “transactional RFP” activity is being handled by programmatic direct technologies that include companies like NextMark, Centro, iSocket, and AdSlot, not to mention MediaOcean.

What about remnant? We really didn’t think about it much. Actually, realizing how worthless most of that below-the-fold and deep-paged inventory was, we ran house ads, or bundled lots of “value added ROS” impression together for our good customers. Those were simple days, when monetization was focused on having salespeople sell more—and pushing your editorial team to produce more content worthy of high CPM banner placements.

Come to think of it, it seems like not much has changed over the last 10 years, with the notable exception of publishers’ approach to remnant inventory. About five years ago, they found some ad tech folks to take 100% of it off their hands. Even though they didn’t get a lot of money for it, they figured it was okay, since they could focus on their premium inventory and sales relationships. In doing some of those early network deals, I wondered who the hell would want millions of below-the-fold banners and 468x90s, anyway? Boy, was I stupid. Close your eyes for a year or two, and a whole “Kawaja map” pops up.

Anyhow, we all know what happened next. Networks used data and technology to make the crap they were buying more relevant to advertisers (“audience targeting”), and the demand side—seeing CPMs drop from $17 to $7, played right along. Advertisers LOVE programmatic RTB buying. It puts them in the driver’s seat, lets them determine pricing, and also (thanks to “agency trading desks”) lets them enhance their shrinking margins with a media vigorish. Unfortunately, for publishers, it meant that a rising sea of audience targeting capability only lifted the agency and ad tech boats. Publishers were seeing CPMs decline, networks eat into overall ad spending, DSPs further devaluing inventory, and self-service platforms like Facebook siphon off more of the pie.

How do publishers get control back of their remnant inventory—and start to take their rightful ownership of audience targeting?

That has now become simple (well, it’s simple after some painful tech implementation). Data Management Platforms are the key for publishers looking to segment, target, and expand their audiences via lookalike modeling. They can leverage their clients’ first party data and their own to drive powerful audience-targeted campaigns right within their own domains, and start capturing real CPMs for their inventory rather than handing networks and SSPs the lion’s share of the advertising dollar. That is step number one, and any publisher with a significant amount of under-monetized inventory would be foolish to do otherwise. Why did Lotame switch from network to DMP years ago? Because they saw this coming. Now they help publishers power their own inventory and get back control. Understanding your audience—and having powerful insights to help your advertisers understand it—is the key to success. Right now, there are about a dozen DMPs that are highly effective for audience activation.

What is even more interesting to me is what a publisher can do after they start to understand audiences better. The really cool thing about DMPs is that they can enable a publisher to have their own type of “trading desk.” Before we go wild and start taking about “PTDs” or PTSDs or whatever, let me explain.

If I am BigSportsSite, for example, and I am the world’s foremost expert in sports content, ranking #1 or #2 in Comscore for my category, and consistently selling my inventory at a premium, what happens when I only have $800,000 in “basketball enthusiasts” in a month and my advertiser needs $1,000,000 worth? What happens today is that the agency buys up every last scrap of premium inventory he can find on my site and others, and then plunks the rest of her budget down on an agency trading desk, who uses MediaMath to find “basketball intenders” and other likely males across a wide range of exchange inventory.

But doesn’t BigSportsSite know more about this particular audience than anyone else? Aren’t they the ones with historical campaign data, access to tons of first-party site data, and access to their clients’ first party data as well? Aren’t they the ones with the content expertise which enables them to see what types of pages and context perform well for various types of creative? Also, doesn’t BigSportsSite license content to a larger network of pre-qualified, premium sites that also have access to a similar audience? If the answer to all of the above is yes, why doesn’t BigSportsSite run a trading desk, and do reach extension on their advertisers’ behalf?

I think the answer is that they haven’t had access to the right set of tools so far—and, more so, the notion of “audience discovery” has somehow been put in the hands of the demand side. I think that’s a huge mistake. If I’m a publisher who frequently runs out of category-specific inventory like “sports lovers,” I am immediately going to install a DMP and hire a very smart guy to help me when I can’t monetize the last $200,000 of an RFP. Advertisers trust BigSportsSite to be the authority in their audience, and (as importantly) the arbiter of what constitutes high quality category content.

Why let the demand side have all of the fun? Publishers who understand their audience can find them on their own site, their clients’ sites, across an affiliated network of partner sites, and in the long tail through exchanges. These multi-tiered audience packages can be delivered through one trusted partner, and aligned with their concurrent sponsorship and transactional premium direct advertising.

Maybe we shouldn’t call them Publisher Trading Desks, but every good publisher should have one.

[This article originally appeared in AdExchanger on 4/5/2013]

Same Turkey, New Knife

The way the ad tech world looked pre-DSP...and pre-DMP

Technology may still capture the most advertising value, but what if publishers own it?

A few years ago, ad technology banker Terence Kawaja gave a groundbreaking IAB presentation entitled, “Parsing the Mayhem: Developments in the Advertising Technology Landscape.” Ever since then, his famed logo vomit slide featuring (then) 290 different tech companies has been passed around more than a Derek Jeter rookie card.

While the eye chart continues to change, the really important slide in that deck essentially remains the same. The “Carving up the stack” slide (see above), which depicts how little revenue publishers see at the end of the ad technology chain, has changed little since May 2010. In fact you could argue that it has gotten worse. The original slide described the path of an advertiser’s $5 as it made it’s way past the agency, through ad networks and exchanges, and finally into the publisher’s pocket.

The agency took about $0.50 (10%), the ad networks grabbed the biggest portion at $2.00 (40%), the data provider took two bits (5%), the ad exchange sucked out $0.35 (7%), and the ad server grabbed a small sliver worth $0.10 (2%), for a grand total of 64%. The publisher was left with a measly $1.80. The story hasn’t changed, and neither have the players, but the amounts have altered slightly.

While Kawaja correctly argued that DSPs provided some value back to both advertisers and publishers through efficiency, let’s look ahead through the lens of the original slide. Here’s what has happened to the players over the last 2 years:

  • Advertiser: The advertiser continues to be in the cat bird seat, enjoying the fact that more and more technology is coming to his aid to make buying directly a fact of life. Yes, the agency is still a necessary (and welcomed) evil, but with Facebook, Google, Pandora, and all of the big publishers willing to provide robust customer service for the biggest spenders, he’s not giving up much. Plus, agency margins continue to shrink, meaning more of their $5.00 ends up as display, video, and rich media units on popular sites.
  • Agency: It’s been a tough ride for agencies lately. Let’s face it: more and more spending is going to social networks, and you don’t need to pay 10%-15% to find audiences with Facebook. You simply plug in audience attributes and buy. With average CPMs in the $0.50 range (as opposed to $2.50 for the Web as a whole), advertisers have more and more reason to find targeted reach by themselves, or with Facebook’s help. Google nascent search-keyword powered display network isn’t exactly helping matters. Agencies are trying to adapt and become technology enablers, but that’s a long putt for an industry that has long depended on underpaying 22 year olds to manage multi-million dollar ad budgets, rather than overpaying 22 year old engineers to build products.
  • Networks: Everyone’s talking about the demise of the ad network, but they really haven’t disappeared. Yesterday’s ad networks (Turn, Lotame) are today’s “data management platforms.” Instead of packaging the inventory, they are letting publishers do it themselves. This is the right instinct, but legacy networks may well be overestimating the extent to which the bulk of publishers are willing (and able) to do this work. Networks (and especially vertical networks) thrived because they were convenient—and they worked. Horizontal networks are dying, and the money is simply leaking into the data-powered exchange space…
  • Data Providers: There’s data, and then there’s data. With ubiquitous access to Experian, IXI, and other popular data types through 3rd party providers, the value of 3rd party segments has declined dramatically. Great exchanges like eXelate give marketers a one-stop shop for almost every off-the-shelf segment worth purchasing, so you don’t need to strike 20 different license deals. Yet, data is still the lifeblood of the ecosystem. Unfortunately for pure-play segment providers, the real value is in helping advertisers unlock the value of their first party data. The value of 3rd party data will continue to decline, especially as more and more marketers use less of it to create “seeds” from which lookalike models are created.
  • Exchanges: Exchanges have been the biggest beneficiary of the move away from ad networks. Data + Exchange = Ad Network. Now that there are so many plug and play technologies giving advertisers access to the world of exchanges, the money had flowed away from the networks and into the pockets of Google AdX, Microsoft, Rubicon. PubMatic, and RMX.
  • Ad Serving: Ad serving will always be a tax on digital advertising but, as providers in the video and rich media space provide more value, their chunk of the advertiser pie has increased. Yes, serving is a $0.03 commodity, but there is still money to be made in dynamic allocation technology, reporting, and tag management. As an industry, we like to solve the problems we create, and make our solutions expensive. As the technology moves away from standardized display, new “ad enablement” technologies will add value, and be able to capture more share.
  • Publisher: Agencies, networks, and technologists have bamboozled big publishers for years, but now smart publishers are starting to strike back. With smart data management, they are now able to realize the value of their own audiences—without the networks and exchanges getting the lion’s share of the budget. This has everything to do with leveraging today’s new data management technology to unlock the value of first party data—and more quickly aggregate all available data types to do rapid audience discovery and segmentation.

 The slide we are going to be seeing in 2012, 2013 and beyond will show publishers with a much larger share, as they take control of their own data. Data management technology is not just the sole province of the “Big Five” publishers anymore. Now, even mid-sized publishers can leverage data management technology to discover their audiences, segment them, and create reach extension through lookalike modeling. Instead of going to a network and getting $0.65 for “in-market auto intenders” they are creating their own—and getting $15.00.

Now, that’s a much bigger slice of the advertising pie.

[This post originally appeared in ClickZ on 2/1/12]

The Great Publisher Disruption

ADOTAS – Remember when you used to really depend on your local paper? For finding jobs, houses, getting the local weather forecast, selling that boat in your yard, and getting last night’s sports scores? I still do…but barely.

Most of what your local paper offers can be found in greater abundance (and at higher quality) elsewhere and, now that everyone is glued to their iPhone, rather than flipping newsprint on their commute, most of that content is only a click (or, more likely, a finger touch) away.

Jobs Section –>
Real Estate Section –> MLS, Zillow
Business News –>
Weather Report –>
Classified Sales –>Craigslist
Sports –>
Travel Section –>
National News –>
Gossip –>

As the above demonstrates, the only area of superior content the local news website has left is local news, and even that has suffered as papers reduce reporting staff and rely more upon outside content providers to fill pages. Although local papers came to the online party rather late, they managed to quickly build reliable websites and leverage their most valuable content effectively.

Monetizing that content has fallen far short of revenue expectations for the most part. The AAAA’s recent report that ad agencies lose up to a third of their media cost servicing digital media buys (as opposed to only 2% with television) was eye opening, but probably nothing compared to what publishers feel.

Back when I was running sales for a Nielsen group, we were struggling with the fact that the same $100,000 once earned by selling a small schedule of print ads was now taking an enormous effort to create.

With print, you are simply selling space. The advertiser provided the content (a PDF) and you put it inside a magazine or newspaper, alongside compelling editorial. Publishers focused on producing the content they wanted and advertisers produced brand ads that appealed to a like audience.

Then, all of the sudden, advertisers started to lose interest in print advertising alone. Sure, maybe they still ran a small print schedule, but now they wanted some content to go along with it: maybe a “microsite” or a custom series of events, or perhaps an advertorial.

Then publishers found themselves allocating resources to writers, designers, and photographers—and acting like a small agency on behalf of their clients. Kind of cool, but the problem was that the advertiser had the same $100,000 to spend. They were all over you, and they wanted stuff like “ROI.” Publishers’ margins were compressed, resources (once dedicated mostly to producing their own content) were misallocated, and their employees were getting burnt out.

Let’s take this to 2007, and the emergence of social media. Now advertisers didn’t even need publishers to develop their content, because they could create their own blogs from scratch (Blogger) and start building online communities (Facebook). Enter Twitter and now every employee in the building has their own mini PR platform which could be leveraged for the company.

Talk about disruption. With thousands of really smart writers, photographers, and designers willing to work cheaply, from home — and with access to free, web-based tools equal or more powerful than any in-house software a publishing company could provide, now publishers were losing the only edge they had: the ability to produce content at scale.

The Googles of the world will always argue that they “need” content providers like The New York Times to continue to provide thought leadership, but web-based content marketplaces like Associated Content and others have only validated the concept that traditional publishers (no matter how big their websites are) are losing their power positions when it comes to content. (Except WSJ, which produces content so exceptional that people are willing to pay for it, but that’s for another article).

So, in this new reality, the publisher is left trying to protect his last tangible asset: his online advertising inventory. He can’t sell subscriptions, he can’t pay to have leadership in any other category besides local news, and now huge sites can geotarget ads to create larger audiences than he has. Spot quiz: who has more unique users in the Anchorage, Alaska DMA: Yahoo or the Anchorage Daily News? I don’t know either, but this is part of the problem.

When the starting point for most computers is search, local media misses the boat on what used to be their wheelhouse. Search for “Anchorage restaurants” on Google, and Fodors, Yahoo, and the local visitor’s bureau sites come up before

In response to this atmosphere of ever-increasing margin compression, competition, customer dilution, and constant need to understand and embrace new technologies, local publishers turned to the experts in online revenue monetization: networks, exchanges, and aggregators. Now (with networks and exchanges), as simple as placing a few ad tags throughout their pages, newspapers could monetize the 70% of inventory they couldn’t sell directly.

Establishing a daisy-chain of ad calls to backfill their unsold inventory was easy, and at least there was some visibility into revenue (amount of impressions available, divided by 1,000, times 65 cents). Despite the ease of use, the rates continue to be painfully cheap, and you never can really tell what the tolerance level of your audience is for an endless stream of teeth whitening, tanning, diet, or Acai berry offers will be.

Aggregators like Centro, LION New Media, Quadrant One, or Cox Cross Media offer a much better solution: real advertisers that need and respect real local inventory. These aggregators provide a great one-stop shop for advertisers and agencies that may not have the depth of knowledge (or personnel) to negotiate and service a multitude of small buys on dozens of local media sites.

As a result these aggregators earn the money they arbitrage by providing the expertise to buy local media at scale. Smarter companies like Centro are leveraging the in-house systems they have developed over the years to navigate this process and making it available to agencies directly (Transis).

However, when it comes to selling premium inventory, specialized sponsorships, or anything beyond standard inventory, the aggregators can’t really play in that space at scale; advertisers still need to partner with local media to make those deals happen.

Ultimately, I see local websites winning by being able to offer more than just inventory. For them, hustling uniques and impressions is a zero sum game. They will never compete against the networks and (with 65-cent CPMs on their remnant space) the networks and exchanges aren’t exactly their best allies.

What agencies need is for technology to help them scale the way they reach advertisers, in an open and transparent way—and systems that give them the ability to do more than place an ad tag on their pages and pray for a good campaign to hit the transom.

We feel the future for publishers is an open marketplace that enables good local media sites to package their premium inventory to advertisers who truly value the local audience: the regional ad agencies across the country who service the local hospitals, schools, banks, and businesses that need local content aimed at local customers.

Ultimately, publishers need systems that can give them placement level control over their inventory, total pricing and deal point control, and access to both agencies and direct advertisers in the same environment. There should be a place between getting a 75-cent Acai berry ad on your homepage and running a $50 CPM rich media expandable.

Publishers need to be able to negotiate both types of deals, and do them at scale, with total control. An open and transparent marketplace that enables publishers to market their entire inventory—not just remnant—is where the future is headed.

[first published in Adotas, 4/1/2010]

Changing the Game

The Evolution of Real Time Bidding Means Better Inventory, and Higher Bids

For years, publishers have devalued their inventory by letting a daisy chain of remnant inventory networks and exchanges leverage their audience. Because every publisher was willing to place ads on every single page, sheer scale created the opportunity for 3rd parties to extract value by adding the splash of data that changed CPMs from pennies into dollars. As third party data shrinks, the opportunity for publishers to profit from partnering with technology and data companies also shrinks—but the near ubiquity of real time bidding also creates many new and exciting opportunities for publishers to package and sell their higher value inventory and audiences. Here are three tactics critical for succeeding in post-legislation era:

1)      Change the Bids: Although real time bidding has gone from obscure, future-facing media theory to being part of the ongoing media conversation, demand-side players still put RTB in the same bucket as remnant networks. When inventory is being traded in a true exchange that is agnostic with regard to pricing, it is assumed that some inventory will be priced high, and some low. Today, the preponderance of inventory available in both private and public exchanges is composed of the same low-value impressions most networks offer. This will change. Once supply side players start selling their high-value inventory inside exchanges, the game changes. Look for private, exchange-based marketplaces to crop up that connect prime demand side customers with the best inventory available on the planet. This is the future of RTB.

2)      Own the Data: Given the coming legislative tsunami, the common wisdom is that there will be severe shrinkage in the cookie pool, leading to a decline in targetable audience. Consumers will have to opt into targeting—or have much easier access to browser-based tools that enable them to opt out more easily. Either way, it seems apparent that cookie-addressable audiences will decline. For publishers, this may be the greatest thing that ever happened. At what point did publishers decide to let 3rd party technology companies know more about their audiences than they did? While that is somewhat of an exaggeration, I think the successful modern publisher must have a strategy for targeting their own inventory using first-party data.

3) Stop the Madness: Many publishers realize they have a inventory management problem. Like addicts, they know exactly what their problem is doing to their lives but, when confronted by the source of their addiction, easily crumble. For digital publishers, the crack pipe is called remnant inventory and monthly checks from network and exchange enablers keep the ads flowing.  Back in the old days of print publishing, we understood that ads didn’t have to appear on every single page. The expensive ones were in the front, and the cheap ones (classified) were all crammed in the back. Not a bad strategy. I wonder who decided that every single page on the internet had to have 3 standard IAB-sized ads on it. Maybe the time has come to end “value-added” impressions, and cut back the number of remnant ads available on your site. That day won’t come for a while, which is why companies like Rubicon and AdMeld, and PubMatic exist.

As the real time universe becomes more ubiquitous, more than just remnant inventory will be bought and sold on a bidded basis. For publishers, the challenge will not only be how to squeeze every penny out of the cheapest inventory with remnant optimizers, and managing the declining availability of targetable inventory (based on 3rd party data availability). The challenge will be balancing the decline in remnant revenue with the rise in bidded high value inventory. How much of your premium audience will you make available in real time to your existing and new advertisers in open exchanges? Getting that mix correct will make some publishers (and private publisher inventory pools) extremely profitable, and kill other publishers altogether.

[This article appeared on 4/18/11 in iMediaConnection]

Rise of the Machines

Where do People Fit into a World that Promises Endless Media Automation?

Ever since man tied a rope to an ox, there has been a relentless drive to automate work processes. Like primitive farming, digital media buying is a thankless, low-value task where results (and profits) do not often match the effort involved. Many companies are seeking to alleviate much of the process-heavy, detail-oriented tasks involved in finding, placing, serving, optimizing, tracking, and (most importantly) billing digital media campaigns with various degrees of success.

Let’s take the bleeding edge world of real-time audience buying. Trading desk managers are often working in multiple environments, on multiple screens. On a typical day, he may be logging into his AppNexus account, bidding on AdBrite for inventory, bidding for BlueKai stamps in that UI, looking for segmentation data in AdAdvisor, buying guaranteed audience on Legolas, trafficking ads in Atlas, and probably looking at some deep analytics data as well. If he is smart, he is probably managing that through a master platform, where he can look at performance of guaranteed display and even other media types. How efficient does that sound?

To me, it sounds like six logins too many. Putting aside the obvious fact that an abundance of technology doesn’t lead to efficiency (how’s “multitasking” working out for your 12 year old, by the way?), I wonder we aren’t asking too much of digital as a whole. How many ads have you clicked on lately? If the answer is zero, then you are in a large club. Broken down to its most basic level, we are working in a business that believes a 0.1% “success” rate is reason to celebrate. But the “click is a dead metric” some say. Really? Isn’t the whole point of a banner ad to drive someone to your website? When did that change?

All of this is simply to illustrate the larger point that the display advertising industry, for all of its supposed efficiencies, is really still in its very nascent stages. Navigating the commoditized world of banner advertising is still very much a human task, and the many machines we have created to wrestle the immense Internet into delivering an advertiser the perfect user are still primitive. For a short while longer, digital media is still the game of the agency media buyer…but not for long.

Let’s look at the areas in which smart media people add value to digital campaigns: site discovery, pricing, analytics and optimization, and billing.

Site Discovery

In the past, half the battle was knowing where to go. Which travel sites sold the most airline tickets? Which sites indexed most highly against men of a certain age, looking for their next automobile? What publisher did you call to get to IT professionals who made purchasing decisions on corporate laptops? Agencies had (and still have) plenty of institutional knowledge to help their clients partner with the right media to reach audiences efficiently and—even with the abundance of measurement tools out there—a lot of human guidance was needed. Now, given the ability to purchase that audience exactly using widely available data segments, the trick is simply knowing where to log in. I just found the latter IT professional segment in Bizo in less than 2 minutes. So the question becomes: how are you leveraging data and placement to achieve the desired result, and how efficiently are you doing it?


It used to be that the big agencies could gain a huge pricing advantage through buying media in bulk. Holding company shops leveraged their power and muscled down publisher rate card by (sometimes) 80% or more with promised volume commitments, leaving smaller media agencies behind. Then, a funny thing happened: ad exchanges. All of the sudden, nearly all of the inventory in the world was available, and ready to be had in a second-price auction environment. Now, any Tom , Dick, and Harry with a network relationship could access relatively high quality impressions at prices that were guaranteed never to be too high (in a second-price auction, the winning bid is placed at the second highest price, meaning runaway “ceiling” bids are collapsed). Whoops. With their pricing advantage eliminated, large agencies did the next best thing: eliminated the middleman by building their own exchanges, which we have been calling “DSPs.” So, you don’t need human intervention to ensure pricing advantages.

Analytics and Optimization

What about figuring out what all the data means? After all, spreadsheets don’t optimize media campaigns. Don’t you need really smart, analytical media people to draw down click- and view-based data, sift through conversion metrics, and build attribution models? Maybe not. Not only are incredible algorithms taking that data and using machine learning to automatically optimize against clicks or conversions—but programmatic buying is slowly coming to all digital media as well.  In the future, smart technology will enable planners to create dynamic media mixes that span guaranteed and real-time, and apply pricing across multiple methodologies (CPM, CPC, CPA). Much of that work is being done manually right now, but not for long.


Sadly, much of the digital media business comes down to billing at the end of the day. Media companies struggle tremendously with reconciling numbers across multiple systems, and agency ad servers don’t seem to speak the same language as publisher ones. The bulk of a media company’s time seems to be spend just trying to get paid, and an incredible amount of good salary gets burnt in the details of reconciliation and reporting. This is slowly changing, but the advent of good API development is starting to make the machines talk to each other more clearly. The platforms that can “plug in” ad serving and data APIs most easily have a lot to gain, and the industry as a whole will benefit from interoperability.

So, are people doomed in digital media? Not at all. There are going to be a lot less digital media buyers and planners needed—but what agencies are really going to need are smart media people. Right now, you need 4 people to manage 10 machines. In the near future, you will need 1 smart person to manage 1 platform—and the other three people can focus on something else. Maybe like talking to their clients.

[This article originally appeared in ClickZ on 4/14/11]

The Agency of Procrustes

Is Your Media Shop the Right Fit for the Digital Age?

Nassim Taleb’s marvelous book of aphorisms is called The Bed of Procrustes, named after the myth of Procrustes, a cruel owner of a roadside estate between Athens and Eleusis in ancient Greece. According to Taleb,

He abducted travelers, provided them with a generous dinner, then invited them to spend the night in a rather special bed. He wanted the bed to fit the traveler to perfection. Those who were too tall had their legs chopped off with a sharp hatchet; those who were too short were stretched.

Taleb’s point is that we humans tend to “squeeze the world into crisp, commoditized ideas.” In short, we try and fit things we don’t understand into our particular worldview. But, what if the new things don’t fit?

As a digital media agency owner faced with keeping up with the times and (more importantly) earning margins from notoriously labor intensive digital campaigns, it is tempting to fall back on time-worn models. If you think about the tried and true “agency” model, it is exactly what the dictionary says it is: “a consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties.” In other words, the client can do the work himself, but would rather stick to making widgets or selling plane tickets than have 300 different media and technology relationships to contend with.

The problem? That’s not enough anymore. What clients want—and an increasing number of them expect, is a different definition of “agency.” Maybe even a legal understanding of the term: the person or thing through which power is exerted or an end is achieved. Is your digital agency exerting true power on behalf of your clients, or are you just buying media? I believe that, in a world where technology enables most agencies to have ubiquitous access to media and software tools, the modern digital agency needs to go beyond traditional notions of “agency” and provide their clients with unique expertise.

The traditional agency “bed” is still rather misshapen for the world of emerging technology. Most shops still don’t have a cohesive social strategy (beyond Facebook); the technology to properly target audiences through exchanges; or the ability to leverage technology to wring performance from digital creative. Some do, and are leveraging relationships with social technology providers, DSPs, and creative optimization companies. The problem here is that many of those technology providers are going directly to your clients as well.  So, how do you defend against disintermediation and start building proprietary expertise to enable you to win and retain digital business in the future?

  • Data: Create it, analyze it, tie into your clients’ data, and make it actionable. I know an agency in upstate New York that only gets paid every time its client performs an oil change. The agency is tied into their client’s POS system, and gets a true end-to-end view of attribution. They know how they are getting people to the business, when, and how they are getting them to return. I know other agencies that, through tools like Datran’s Aperture, are getting a household-level view of who is converting on their online campaigns, and using online data to go offline to seek new customers and reengage them. If you are not leveraging the data you currently have—and seeking to partner with your client to create or get access to new streams of data, then you are not being an extension of power to your client.
  • Technology: How is your shop leveraging available technology to gain efficiency? Media platforms like Transis, Facilitate, and TRAFFIQ (disclosure: I work for TRAFFIQ) offer agencies the ability to let workflow technology handle the blocking and tackling of digital media (RFPs, AdOps, billing, etc) so agencies can work on things that have value (strategy, creative execution, data analysis).  What about real time bidding technology that uses machine learning to auto-optimize campaigns based on performance data? If you are not leveraging technologies like these, then you are already in danger of becoming extinct.
  • People: If you are in fact going to leverage data and technology to transform your agency business, then you are going to necessarily need different people. In the good old days, you could hire a 22-year old for $25,000 and bill them out at $40,000. Unfortunately, the 22 year old wants $35,000 these days, and by the time you train them to be a “digital media expert,” a larger shop will pay them $50,000 to take advantage of the free training you gave them, and start billing them out at $75,000. Also, that 22 year old media person who used to good at collating spreadsheets and ignoring publisher e-mails is not the person who is going to transform your business. Someone who can dive into data to determine media placements—or someone who is passionate about the social space and understands the new social technology ecosystem are the folks that are going to make a difference (and profit) for your agency now.

In the end, Procrustes faced poetic justice. One of his guests was the mighty Theseus, of Minotaur-slaying fame. Theseus invited Procrustes to lie in his own bed and, seeing it slightly too small for his frame, decapitated him to create the perfect fit. Your agency may not currently be the right fit for clients that need advanced digital agency help. The answer, however, is to make your bed fit your clients better, rather than shrink them down so they fit into your legacy paradigm.

[This article originally appeared in Adotas 3/16/11]

PLATFORM WARS #4: Ecosystem Bubble?

The Coming Consolidation of the “Digital Display Technology Landscape”

If I had to pick “bravest guy in this business” I would pick Luma Partners banker Terence Kawaja. Back when he was at GCA Savvian, he tried to actually put the business of digital display advertising into one 8 ½ by 11 document, and give it some order. Ever since then, every technology executive, VC, industry analyst, and agency executive has been waving it around like a flag. It’s kind of like those illustrated town maps, where some guy paints Main Street, and every business with $300 gets a spot on the map, along with their logo and maybe even a cartoon depiction of the owner.

Our map, festooned with what I have been calling “logo vomit” contains several hundred microscopic logos, broken out into various categories that our industry has sub-segmented into, bracketed by the ever-powerful “advertisers” and “publishers” on each end. It’s not quite accurate. If importance were the measure by which logos were sized in the “landscape” sandwich, then the bread would be 10 inches thick and the companies in between would be mere condiments, with a cornichon-sized AppNexus in the middle. The influence of Gorilla-sized agency holding companies like WPP and elephant-sized “publishers” like Google are not properly represented.

Little red dotted lines encircle those lucky enough to get gobbled up by the bread. Ad exchanges have been a popular acquisition target (after all, someone has to figure out how to sell commoditized inventory. Ad servers even more so (that’s where the data comes from and, looking at the map, data seems to be the glue that binds the murky middle of the ecosystem together). So, how about all of those wonderful companies in the middle?

Some of those companies are struggling. A few are doing pretty well. Most (at least those that have been VC funded) are looking forward to Gobble Day, when Google writes them a check at a valuation that ignores their upside down cap table, and lets their founders avoid the inevitable cram down from yet another round of venture funding. Many of the companies in the middle will not survive. I’m not sure, but maybe there is a bubble in the Ecosystem. Certainly, it is tough to see it growing any bigger.

Data: A healthy supply of good audience targeting data (Experian, TargusInfo) is the foundation of the Ecosystem. As you will note, most of the players have been around for a long time, and they are going to quickly assimilate any new players with interesting data sets. What will slim down is the Data Aggregators category. Agencies don’t care who provides the data, as long as it works, and most players just spin the same data everyone else has. The company that can build the best hooks into inventory supplies wins, and they win by creating implementation “friendly” APIs. End of story. Companies like Exelate and Bizo seem to be executing well.  Other companies are struggling to get integrated into next generation systems such as AppNexus, and are starting to reconfigure their business models to align with the world of ubiquitous data usage. The winners are going to be the companies that are also configured to survive the coming legislative tsunami, and let companies bring their own data to the party (both publishers and advertisers). The work that Quantcast is doing in this area is very intriguing.

Creative Optimization: This area of the Ecosystem is interesting for a few reasons. In a world of commoditized inventory and data, it is the stories that agencies can tell that become important. In other words, the creative. Since not every agency can build viral ads on demand, a certain amount of technology is going to be necessary to wring performance from the most critical part of the value chain: the ad itself. People want targeted ads, and creative optimization can magically deliver me a coupon to my local Whole Foods since it knows I live in area code 11743, then I become a happier consumer. The problem? Doing creative optimization correctly—and in a way that an agency is willing to dedicate the time to—is very hard. Not many of these smaller companies will survive, because doing it right needs very tight ad server integration. Look for companies like MediaMind to start dominating here. Tumri is another one that is starting to unlock the puzzle.

Media Management: Companies in my little corner of the Ecosystem map (I work for TRAFFIQ) were very proud recently to get a category upgrade (we were once lumped in with “Ad Operations”). This is another highly interesting area of the map. You have the big legacy companies like DDS trying to find relevance with their digital offerings, and smaller start ups like Facilitate and TRAFFIQ providing disruption in the space, and media arbitrage companies like Centro pulling their technology forward with “self serve” platforms. Winners here will be the companies that can quickly centralize the cumbersome process of digital media workflow, create access to the systems that agencies depend on (data, serving, billing), and find a pricing model that continues to enable efficiency. These companies are in the business of using technology to try and lasso the disparate parts of the Ecosystem together, so this is a fun space to watch. Success here will be time- and capital-intensive, but the winners will be a part of every media transaction—on both sides—so the potential spoils are large.

Media Buying Desks: This is another fascinating area. A lot of conversation in the space has been around the Cadreons, Vivakis, and Adnetiks of the world. When you can leverage that much demand and tailor a technology platform just for your agency, that is the type of “start-up” build-out anyone would like to be a part of. I wonder how sustainable it is, however. Whether the technology is proprietary, or has been built on top of other DSPs, I am not sure closed systems can truly succeed in a world of open standards. With AppNexus, suddenly the formerly closed world of exchange trading gets more democratized, and you’ll see other platforms adopt this type of technology—and start to create their own pipes into exchange streams. Big agency buying desks are not going away anytime soon—but more competition is on the way, which may lessen their ability to dominate the space.

Retargeting: This area has been hot, but do we really need 10 different companies that can serve an ad to someone who has been on your website before? The better companies (and those built specifically for seamless integration into existing media systems) will find themselves to be nice tuck-ins for larger technology players. The name “retargeting” alone suggests more of a capability, than a category onto itself.

Networks: The “Custom” and “Targeted” networks in the map are surrounded on all sides. Both loved and hated by our industry for so long, networks continue to give both sides of the aisle what we want, when we want it. For the demand side, networks offer cheap, targeted inventory available in a variety of flavors (contextual, behavioral), and a one-stop shop for hundreds of publishers. For the supply side, networks were the magic money machine. Simply drop some javascript, and wait for your check. Networks basically enabled publishers, in their never-ending quest to append every page on the internet with a banner ad, to devalue their entire inventory (but that’s another article). These days, agencies are coming to the table with their own data, own way to measure performance, and a desire to bid on audience in real time, rather than have it packaged for them. The networks that survive must find a way to (profitably) plug into trading desks and DSPs—and offer a unique type of targeting ability. A tall order. Here, quality counts. Companies that have exchange trading in their DNA (Contextweb) are poised to succeed in this new ecosystem, as well as vertical networks that have curated high quality content sources (Glam).

Some larger trends to look out for:

–          Data: Legislation is going to be a fact of life, and it’s going to shrink available audience pools, and make data segmentation and targeting much harder and more expensive. As a publisher, you need to own the customer relationship and his data. As a technology enabler, you need to make sure you can let your advertiser bring his own data to the table, rather than relying on third parties. That’s what makes Facebook so powerful.

–          Power and Control: It doesn’t seem fair, but the companies that use technology to give the “bread” of the Ecosystem sandwich (Advertisers and Publishers) more power and control will win. You can’t “disintermediate” advertisers like P&G. They know more about their audience than we ever will. But, we can partner with their agencies so let them leverage technology to be more successful. Same with publishers. How can you help the content players understand their audiences, and package them in a way that lets them value them properly? The technology companies that partner with publishers to do that (rather than encourage them to “monetize” more of their cheap content) are also going to win.

The Landscape is ever changing, and we should all thank Terence Kawaja for putting his map on Slideshare and updating it frequently. He’s going to be busy doing that for a while, it seems.

Chris O’Hara works for TRAFFIQ, a web-based workflow solution for digital media, where he is responsible for business development and marketing. He can be reached through his blog at

[This article appeared on 17 February in Adotas]

What are we Selling?

Most of us that are involved in sales, marketing, or business development (they are same thing, actually) in the media space don’t really know what they are selling. And I don’t mean that the sales director or your DSP or data company don’t really understand the way their technology works (which can be the case at times). Surely, the digital media salesman can be relied upon to deploy the latest buzzwords, acronyms, and business jargon at the drop of a two-sided, logo-besmirsched business card. (see everyone’s favorite web humor from the year 2000). We all know what product we are selling.

That doesn’t really cover it, though, does it?

What we are really selling is a dream. The dream of a digital future, and the hope that technology continues to be the solution to the problem, rather than another problem itself. It’s becoming a tough sell out there for a few reasons. I think it all started with the flying car. Ever since the car was invented and the first guy has to wait more than 10 seconds for a traffic light, we have all dreamed of the flying car. The personal hovercraft…essentially the DeLorean from Back to the Future, without the time machine capabilities. That thing was promised to us (coming soon!) way back in the 1950s. It was even clear, not so far back as the 70’s, that we would–with certainty–have something like that by the turn of the century. Well, it’s 2010 and we are all still waiting. The way traffic is getting around New York, Los Angeles and China (they had a traffic jam that lasted a week, recently), we are going to need them soon. Now, even though we still want them, nobody ever talks about them anymore.

I hope that’s not what happens to us. We are out there selling the future of advertising, and the future of how it’s measured, bought, sold, traded, served, shown, billed, and reconciled. Whether you are out there “pimping uniques and impressions” as some like to say, or selling SaaS model software for selling or buying display ads, or hawking premium data sets to ad networks, exchanges, and DSPs–you are selling the dream. You are an evangelist, a technology tent-revivalist of sorts, going from one campaign event to the next, trying to convince people  to take a nice sip of the technology Kool-Aid It tastes pretty sweet at first.

It seems that, with all the technology and measurement tools, that this business is worthy of being proselytized. We are offering  a world that has changed dramatically for the better. Instead of (in the print days) selling some vague subscriber that is self-described as “recalling your ad” and “passing along the magazine an average of 2.3 times,” you are selling results. Doesn’t matter how they pay for it; in the end, everyone is measuring by CPA (including yours, if your software/media/data cost is counted into the equation). The basis for that CPA comes down to the numbers, and the numbers don’t lie. Or, more precisely, they lie in ways that are harder to argue against.

What you are out there selling is control, which is the ability as a buyer to control exactly who you are reaching, and where they are being reached. Control over pricing, which means knowing how that audience is being valued, whether on an impression-by-impression, or guaranteed future audience. Control over what data you use to make decisions about that audience, and control over the technology you use to disperse your messages across the many screens of the interconnected web. We are far away from the time when the dream of total transparency and control over media is as easy as, say, updating your Facebook profile.

But, after the dust settles and an emerging class of technology winners in the media space emerges, we will see how well the dream was sold…and who ended up really buying it.

(Hopefully it’s not all Google).

Chris O’Hara heads up sales and marketing for TRAFFIQ.

[This article appeared in DIGI:day Daily on 12/2/10]